Lords looks to mandate guidance on pension transfers

The amendment, brought forward by Deborah Stedman‑Scott, a minister for work and pensions sitting in the House of Lords, is designed to make it mandatory for individuals to seek guidance from bodies such as the Money and Pensions Service in certain circumstances, such as when advice is not compulsory.

It states: “This amendment enables regulations inserted under section 95(6ZA) of the Pension Schemes Act 1993 to prescribe conditions about obtaining information or guidance from persons such as the Money and Pensions Service, before the trustees or managers may act on a member’s application under section 95.”

This could potentially place further restrictions and increase the time it takes to carry out a defined benefit transfer, as under the regulations a transfer cannot go ahead until the trustees see evidence that guidance has been obtained.

The intricate details of this amendment are not yet known as it is due to be debated as part of the pension schemes bill report stage in the House of Lords on June 30.

However, Tim Smith, lawyer at Herbert Smith Freehills, expects these rules to plug the gap where individuals are not required to take advice to ensure pension savers are as informed as possible before making decisions.

Mr Smith said: “I cannot imagine these regulations would apply where someone is already required to take advice. For example, these rules would be in place to protect those who fall below the £30,000 threshold for DB transfer advice.”

It could also help savers looking to do pension switching or to transfer from a workplace pension into a personal pension scheme, and may help people avoid any potential scams, he added.

Other amendments scheduled include a requirement for Maps to provide, as part of its pension guidance function, a pensions dashboard service to deal with the information from both occupational and personal pension schemes, as well as state pension information.

This article originally appeared on ftadviser.com